CAS Exam 9 Spring 2014, Question 23
Study guide: Exam 9
A reinsurance contract is expected to make a single loss payment at the end of one year.
Given the following information:
| Item | Value |
|---|---|
| Loss distribution | Normal |
| Expected loss | $4,000,000 |
| Standard deviation of loss | $6,000,000 |
| Risk-free rate | 4% |
| Target yield | 12% |
| Standard deviation of yield rate | 15% |
| Normal Table z-Score at 99.9th Percentile | 3.0902 |
Using the swap method, calculate the assets required for the reinsurer to cover a loss at the 99.9th percentile.
Part a (1.75 points)
No current syllabus covers this question; it is kept for the record.
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